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Adjusting the Payroll Tax to Promote Longer Careers

Author

Listed:
  • John Laitner

    (University of Michigan)

  • Dan Silverman

    (Arizona State University)

Abstract

This paper analyzes a prospective Social Security reform that a number of authors have suggested, namely a payroll tax cut targeted on households near retirement. Our approach uses simulations of a life-cycle model, which we estimate from panel data. The simulations study effects on the labor force participation of older households. This paper specifically attempts to improve estimates of the model by incorporating newly available data, using both retirement and wealth accumulation data, and employing a formulation that avoids local optima to isolate only global maxima. Despite the changes, our results are generally consistent with earlier work, though they point to slightly more limited policy benefits.

Suggested Citation

  • John Laitner & Dan Silverman, 2017. "Adjusting the Payroll Tax to Promote Longer Careers," Working Papers wp363, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp363
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    File URL: http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp363.pdf
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    References listed on IDEAS

    as
    1. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
    2. John Laitner & Dan Silverman, 2005. "Estimating Life-Cycle Parameters from Consumption Behavior at Retirement," NBER Working Papers 11163, National Bureau of Economic Research, Inc.
    3. Alan L. Gustman & Thomas L. Steinmeier, 2004. "Personal Accounts and Family Retirement," NBER Working Papers 10305, National Bureau of Economic Research, Inc.
    4. Matthew Weinzierl, 2011. "The Surprising Power of Age-Dependent Taxes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1490-1518.
    5. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2009. "Removing the Disincentives in Social Security for Long Careers," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 21-38, National Bureau of Economic Research, Inc.
    6. Gary Burtless & Joseph F. Quinn, 2002. "Is Working Longer the Answer for an Aging Workforce?," Boston College Working Papers in Economics 550, Boston College Department of Economics.
    7. Laitner, John & Silverman, Dan, 2012. "Consumption, retirement and social security: Evaluating the efficiency of reform that encourages longer careers," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 615-634.
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    Cited by:

    1. John Laitner, 2018. "Addressing Social Security’s Solvency While Promoting High Labor Force Participation," Working Papers wp386, University of Michigan, Michigan Retirement Research Center.

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